Question

Fandry Company has obtained the following data concerning a new product: Production Costs, Using traditional costing method $3.00 per unit Production Costs, Using activity-based costing method $5.00 per unit Nonproduction Costs, Using activity-based costing method $2.50 per unit Fandry Company wants the price of the new product to cover all costs plus a 100% markup. The production process used for the low volume product is very complicated and it has a higher proportion of indirect costs than direct costs. What price per unit should Fandry Company charge for the new product

Answer 1

$15.00 per unit

Step-by-step explanation:

Calculation for the price per unit that Fandry Company should charge for the new product

Using this formula

Price per unit for new product =Production Costs, Using traditional costing method per unit ×

Production Costs, Using activity-based costing method per unit

Let plug in the formula

Price per unit for new product=$3.00 per unit ×$5.00 per unit

Price per unit for new product=$15.00 per unit

Therefore the price per unit that Fandry Company should charge for the new product will be $15.00 per unit